What changed in this filing

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Item 1. Financial Statements

2020-08-14 compared with 2020-05-07 · 112 added, 101 removed, 344 unchanged (38% of the section changed)

19 unchanged sentences

no shares authorized, issued

or outstanding as of March 31, 2020;

or outstanding as of June 30, 2020;

70,378,661 shares authorized and 60,533,313

3 unchanged sentences

10,000,000 shares authorized;

issued or outstanding as of March 31, 2020;

issued or outstanding as of June 30, 2020;

no shares authorized, issued or

2 unchanged sentences

200,000,000 and 100,000,000 shares

authorized as of March 31, 2020 and December 31, 2019, respectively;

and 702,510 shares issued and outstanding as of March 31, 2020 and December 31,

authorized as of June 30, 2020 and December 31, 2019, respectively;

and 702,510 shares issued and outstanding as of June 30, 2020 and December 31,

2019, respectively

8 unchanged sentences

Three Months Ended

Six Months Ended

Operating expenses:

5 unchanged sentences

Interest income

Total other income

Other expense

Total other income (net)

Accretion of Series B convertible preferred stock

1 unchanged sentence

Weighted-average common shares outstanding—basic and diluted

Net loss per share attributable to common stockholders—basic and diluted

Net loss per share attributable to common stockholders—basic and

Comprehensive loss:

Other comprehensive loss:

Unrealized loss on investments

Other comprehensive income:

Unrealized gains on investments (net)

Comprehensive loss

13 unchanged sentences

Balance at March 31, 2019

Issuance of Series B convertible

preferred stock, net of issuance

Stock-based compensation

Balance at June 30, 2019

CONVERTIBLE PREFERRED STOCK

16 unchanged sentences

commissions and offering

costs of $3,885

Stock-based compensation

1 unchanged sentence

Balance at March 31, 2020

Initial public offering, net of

underwriting discounts,

commissions and offering

Exercise of stock options

Stock-based compensation

Unrealized gain on

Balance at June 30, 2020

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

11 unchanged sentences

Proceeds from maturities and sales of short-term investments

Purchases of short-term investments

Purchases of property and equipment

Net cash provided by investing activities

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

Proceeds from initial public offering, net of underwriting discounts, commissions and

offering costs

Proceeds from initial public offering, net of underwriting discounts and commissions

Payment of issuance costs

Proceeds from exercise of options

Net cash provided by financing activities

8 unchanged sentences

Property and equipment purchases included in accrued expenses

Unrealized loss on investments

Unrealized gain on investments

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the periods shown above:

Three Months Ended

Six Months Ended

Cash and cash equivalents

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Nature of the Business

(“IMARA” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to developing and commercializing novel therapeutics to treat rare inherited genetic disorders of hemoglobin, known as hemoglobinopathies, which have significant unmet medical need.

(“IMARA” or the “Company”) is a clinical-stage biopharmaceutical company dedicated to developing and commercializing novel therapeutics to treat patients suffering from rare inherited genetic disorders of hemoglobin, known as hemoglobinopathies, which have significant unmet medical need.

The Company was incorporated in January 2016 under the laws of the State of Delaware, and its principal offices are in Boston, Massachusetts.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations.

Such risks and uncertainties may be amplified by the COVID-19 pandemic and its impact on the Company’s business and the global economy.

The Company’s sole product candidate currently under development, IMR-687, as well as any other product candidates the Company may develop, will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization.

2 unchanged sentences

In February 2020, the Company effected a 1-for-6.299 reverse stock split of the Company’s issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each of the Company’s outstanding series of preferred stock.

All share and per share amounts in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the change in par value of common stock to additional paid-in capital.

All share and per share amounts in the unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock split, including reclassifying an amount equal to the change in par value of common stock to additional paid-in capital.

On February 25, 2020, the Company issued and sold 1,562,994‬ shares of Series B convertible preferred stock (“Series B Preferred Stock”), at a price of $10.9722 per share, upon a waiver of specified milestone conditions from the holders of a majority of the shares then held by holders of Series B Preferred Stock, and raised approximately $17.1 million in net proceeds after deducting less than $0.1 million of issuance costs.

On March 16, 2020, the Company completed an initial public offering (“IPO”) of its common stock and issued and sold 4,700,000 shares of common stock at a public offering price of $16.00 per share, resulting in gross proceeds of $75.2 million.

On April 13, 2020, the Company issued and sold an additional 705,000 shares of common stock pursuant to the exercise of the underwriters’ over-allotment option for aggregate gross proceeds of $11.3 million.

Inclusive of the over-allotment exercise, the Company received approximately $76.5 million in net proceeds from the IPO after deducting $10.0 million of underwriting discounts and commissions and offering expenses.

On April 13, 2020, the Company issued and sold an additional 705,000 shares of common stock pursuant to the exercise of the underwriters’ option to purchase additional shares for aggregate gross proceeds of $11.3 million.

Inclusive of the exercise by the underwriters of their option to purchase additional shares, the Company received approximately $76.5 million in net proceeds from the IPO after deducting $10.0 million of underwriting discounts and commissions and offering expenses.

Upon the closing of the IPO, all 70,378,661 shares of outstanding preferred stock automatically converted into 11,172,955 shares of common stock.

1 unchanged sentence

The Company has incurred recurring negative cash flows since inception and has funded its operations primarily from the sale of convertible preferred stock and proceeds from the IPO.

As of March 31, 2020, the Company had cash, cash equivalents, and investments of $105.9 million and an accumulated deficit of approximately $62.0 million.

As of June 30, 2020, the Company had cash, cash equivalents, and investments of $106.3 million and an accumulated deficit of approximately $72.2 million.

The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts.

The Company previously identified conditions and events that raise substantial doubt about its ability to continue as a going concern.

As a result of the sale and issuance of the remaining shares in the second tranche of the Series B Preferred Stock and completion of the IPO, the Company believes that that the net proceeds the Series B Preferred Stock and IPO, together with its cash, cash equivalents and investments as of March 31, 2020 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.

The Company believes its cash, cash equivalents and investments as of June 30, 2020 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.

The Company will need additional funding to support its planned operating activities.

3 unchanged sentences

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates of the Financial Accounting Standards Board (“FASB”).

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The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited financial statements.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of March 31, 2020, the results of its operations for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020 and 2019.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of June 30, 2020, the results of its operations for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019.

Such adjustments are of a normal and recurring nature.

The results for the three months ended March 31, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.

The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.

Principles of Consolidation

The accompanying condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, IMARA Security Corporation and IMARA E.U.

The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiaries, IMARA Security Corporation and IMARA E.U.

All intercompany transactions and balances have been eliminated in consolidation.

Summary of Significant Accounting Policies

The significant accounting policies and estimates used in the preparation of the accompanying condensed consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2020.

There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2020.

The significant accounting policies and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2020.

There have been no material changes in the Company’s significant accounting policies during the three and six months ended June 30, 2020.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods.

Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, accrued research and development expenses, stock-based compensation expense, the fair value of the common stock and the intrinsic value of the beneficial conversation feature present in the second tranche of the Series B Preferred Stock issued in February of 2020.

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting periods.

Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, accrued research and development expenses, stock-based compensation expense, the fair value of the common stock and the intrinsic value of the beneficial conversation feature present in the second tranche of the Series B Preferred Stock issued in February of 2020.

Actual results could differ materially from those estimates.

6 unchanged sentences

After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance.

Should the equity issuance be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations and comprehensive loss.

On March 16, 2020, the Company completed the IPO;

accordingly, the Company recognized the deferred offering costs of approximately $3.9 million as a reduction from gross proceeds associated with the IPO through additional paid-in capital in the accompanying condensed consolidated balance sheet.

Accordingly, there were no deferred offering costs as of March 31, 2020.

Deferred offering costs classified in other assets on the accompanying condensed consolidated balance sheet as of December 31, 2019 was $2.1 million.

Should the equity issuance be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the unaudited condensed consolidated statement of operations and comprehensive loss.

Comprehensive Loss

Comprehensive loss includes net loss and certain changes in stockholders’ equity (deficit) that are excluded from net loss.

The Company’s comprehensive loss was equal to net loss for the year ended December 31, 2018.

For the year ended December 31, 2019, as a result of the Company’s investments in available-for-sale securities, the Company’s comprehensive loss includes unrealized gains and unrealized losses on those available-for-sale securities.

The Company’s comprehensive loss was equal to net loss for the three and six months ended June 30, 2019.

For the three and six month period ended June 30, 2020, as a result of the Company’s investments in available-for-sale securities, the Company’s comprehensive loss includes unrealized gains and unrealized losses on those available-for-sale securities.

Recently Issued Accounting Pronouncements

5 unchanged sentences

ASU 2016-02 supersedes the previous leases standard, ASC 840, Leases .

For public entities, not-for-profit entities and an employee benefit plan that files financial statements with the SEC, the standard is effective for public entities for annual periods beginning after December 15, 2018 including interim periods within those fiscal years.

For all other entities, the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.

This standard will become effective for the Company for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021.

Early adoption is permitted.

6 unchanged sentences

Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments.

For public entities, the amendments in Part I of this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018.

For all other entities, the amendments in Part I of this update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

The amendments in Part I of this update are effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.

Early adoption is permitted for all entities, including adoption in an interim period.

3 unchanged sentences

The amendments align the contractual term under Topic 326 and Topic 842 (Leases) to be consistent, and also clarifies when an entity should record an allowance for credit losses in accordance with Topic 326.

For public business entities that meet the definition of a United States Securities and Exchange Commission (“SEC”) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, the standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For all other entities, the standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted.

This standard became effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company is currently evaluating the impact of this new guidance on the Company’s consolidated financial statements and related disclosures, but does not expect the adoption of ASU 2020-03 or 2016-13 to be material.

Fair Value of Financial Assets and Liabilities

Fair Value of Financial Assets a nd Liabilities

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):

March 31, 2020

June 30, 2020

Quoted Prices in

5 unchanged sentences

Marketable securities:

United States Treasury Bills

Corporate debt securities

12 unchanged sentences

Total financial assets

As of March 31, 2020 and December 31, 2019, the Company’s cash equivalents consisted of money market funds, classified as Level 1 financial assets, as these assets are valued using quoted market prices in active markets without any valuation adjustment.

As of June 30, 2020 and December 31, 2019, the Company’s Level 1 financial assets consisted of cash equivalents held in money market funds, which are valued using quoted market prices in active markets without any valuation adjustment , and United States treasury bills, which are based on quoted market prices in active markets.

The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade securities.

3 unchanged sentences

The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

During the three months ended March 31, 2020 and the year ended December 31, 2019, there were no transfers between fair value measurement levels.

During the three and six months ended June 30, 2020 and the year ended December 31, 2019, there were no transfers between fair value measurement levels.

The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

As of March 31, 2020 and December 31, 2019, the Company had short-term investments consisting of corporate debt securities and commercial paper, which are considered to be available-for-sale investments.

As of June 30, 2020 and December 31, 2019, the Company had short-term investments consisting of United States treasury bills, corporate debt securities, and commercial paper, which are considered to be available-for-sale investments.

These are included in short-term investments on the condensed consolidated balance sheets, even though the stated maturity date may be one year or more beyond the current balance sheet date, as the Company views those securities as available for use in current operations, if needed.

The following table summarizes the Company’s investments (in thousands):

March 31, 2020

June 30, 2020

Amortized Cost

1 unchanged sentence

Gross Unrealized

Commercial paper

United States Treasury Bills

Corporate debt securities

Commercial Paper

December 31, 2019

4 unchanged sentences

Corporate debt securities

As of March 31, 2020, the Company had 11 available-for-sale securities of approximately $13.2 million in unrealized loss positions for less than twelve months.

As of June 30, 2020, the Company had four available-for-sale securities with an aggregate value of approximately $14.5 million in immaterial unrealized loss positions for less than twelve months.

As of December 31, 2019, the Company had no available-for-sale securities in unrealized loss positions The Company has the intent and ability to hold such securities until recovery.

The Company determined that there was no material change in the credit risk of these investments .

As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of March 31, 2020 and December 31, 2019.

As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of June 30, 2020 and December 31, 2019.

Accrued Expenses

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The Company also agreed to pay tiered royalties based on net sales of all products licensed under the agreement in the low single-digit percentages.

To date, pursuant to the license agreement, the Company has made cash payments to Lundbeck of $1.8 million consisting of an upfront payment and ongoing milestone payments, which are recorded as r esearch and development expense.

No payments were made during the year ended December 31, 2019 , or for the three months ended March 31, 2020 .

As partial consideration for the license, the Company issued 167,523 shares of common stock to Lundbeck, which rep resented 8.0% of the Company’s then outstanding equity pursuant to a restricted stock agreement.

No payments were made during the year ended December 31, 2019 , or for the three and six months ended June 3 0 , 2020 .

As partial consideration for the license, the Company issued 167,523 shares of common stock to Lundbeck, which represented 8.0% of the Company’s then outstanding equity pursuant to a restricted stock agreement.

The shares were fully vested on the date of issuance.

The Company also allowed Lundbeck to participate in the fourth tranche of its Series A p referred s tock financing in November 2018 at $1.00 per share.

The Company also allowed Lundbeck to participate in the fourth tranche of its Serie s A p referred s tock financing in November 2018 at $1.00 per share.

The Lundbeck Agreement can be terminated by the Company at any time with 180 days’ written notice.

4 unchanged sentences

The agreement for this space terminated on August 17, 2019.

The Company recorded rent expense of less than $0.1 million during the three months ended March 31, 2019.

The Company recorded rent expense of less than $0.1 million during the three and six months ended June 30, 2019.

In May 2019, the Company entered into a new operating lease agreement for office space totaling 4,210 square feet, located in Boston, Massachusetts with a 62-month term.

2 unchanged sentences

In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, in accordance with the terms of the Lease Agreement.

The Company provided a security deposit of approximately $0.1 million in May 2019, which is included as a component of other assets on the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019.

The Company provided a security deposit of approximately $0.1 million in May 2019, which is included as a component of other assets on the Company’s unaudited condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019.

The Company occupied the space in August 2019 and commenced recognition of rent expense.

The Company recorded rent expense of approximately $0.1 million during the three months ended March 31, 2020.

The Company recorded rent expense of less than $0.1 million during the three months ended June 30, 2020, and approximately $0.1 million during the six months ended June 30, 2020.

The following table summarizes the future minimum lease payments due under the Company’s operating lease (in thousands):

1 unchanged sentence

The Company may from time to time be party to litigation arising in the ordinary course of business.

The Company was not subject to any material legal proceedings during the three months ended March 31, 2020 and year ended December 31, 2019, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.

Indemnification Agreements

The Company enters into standard indemnification agreements in the ordinary course of business.

Pursuant to the indemnification agreements, the Company agrees to indemnify, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners, in connection with any U.S.

patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products.

The term of these indemnification agreements is generally perpetual any time after execution of the agreement.

The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited.

The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.

The Company was not subject to any material legal proceedings during the three and six months ended June 30, 2020 and year ended December 31, 2019, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.

Indemnification Obligations

The Company agrees to standard indemnification obligations as part of entering into agreements in the ordinary course of business.

Pursuant to the indemnification provisions, the Company agrees to indemnify, hold harmless, and to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s business partners, in connection with matters specified in the applicable provision, which may include any U.S.

patent or any copyright or other intellectual property infringement claim by any third-party with respect to the Company’s products or product liability claims by any third-party with respect to the Company’s products.

The term of these indemnification obligations is generally perpetual any time after execution of the agreement.

The potential amount of future payments the Company could be required to make under these indemnification obligations is unlimited.

The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification obligations.

Convertible Preferred Stock

1 unchanged sentence

Upon issuance, each share of Series B Preferred Stock included an embedded beneficial conversion feature as the estimated fair value of the Company’s common stock on the date of issuance of the Series B Preferred Stock was higher than the effective conversion price of the Series B Preferred Stock of $10.9722 per share.

Given the proximity of the issuance to the Company’s public offering, the Company utilized the public offing price of their common stock, $16.00 to determine the intrinsic value of the beneficial conversion feature.

Given the proximity of the issuance to the Company’s public offering, the Company utilized the $16.00 public offing price of its common stock to determine the intrinsic value of the beneficial conversion feature.

As a result, the Company recorded the intrinsic value of the beneficial conversion feature of $7.9 million as a discount on the Series B Preferred Stock at issuance.

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Common stockholders are entitled to receive dividends, as may be declared by the Board, if any, subject to the preferential dividend rights of any preferred stock then outstanding.

Through March 31, 2020, no cash dividends have been declared or paid.

As of March 31, 2020, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding.

As of March 31, 2020 and December 31, 2019, the Company has reserved for future issuance the following shares of common stock:

Through June 30, 2020, no cash dividends have been declared or paid.

As of June 30, 2020, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding.

As of June 30, 2020 and December 31, 2019, the Company has reserved for future issuance the following shares of common stock:

Conversion of outstanding preferred stock

4 unchanged sentences

2016 Stock Incentive Plan

The Company’s 2016 Stock Incentive Plan, (the “2016 Plan”) provides for the Company to issue restricted stock, restricted stock units, stock appreciation rights, incentive stock options, non-statutory stock options and other stock-based awards to employees, officers, members of the Board, consultants and advisors of the Company.

The Company’s 2016 Stock Incentive Plan, (the “2016 Plan”) provided for the grant of restricted stock, restricted stock units, stock appreciation rights, incentive stock options, non-statutory stock options and other stock-based awards to employees, officers, members of the Board, consultants and advisors of the Company.

As of December 31, 2019, the number of shares of common stock authorized to be issued under the 2016 Plan was 2,091,969, of which 228,852 shares remained available for future grants as of December 31, 2019.

As of the effective date of the 2019 Equity Incentive Plan (the “2019 Plan”), and as of March 31, 2020, no shares remained available for future issuance under the 2016 Plan.

As of the effective date of the 2020 Equity Incentive Plan (the “2020 Plan”), no shares remained available for future issuance under the 2016 Plan.

Any options or awards outstanding under the 2016 Plan remain outstanding and effective.

4 unchanged sentences

(1) 1,220,283 shares of the Company’s common stock;

plus (2) the number of shares (up to a maximum of 2,091,969 shares) equal to the sum of (x) the number of shares of the Company’s common stock reserved for issuance under the 2016 Plan that remained available for grant under the 2016 Plan as of March 11, 2020 and (y) the number of shares of the Company’s common stock subject to outstanding awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right.

plus (2) the number of shares (up to a maximum of 2,091,969 shares) equal to the sum of (x) 228,852 shares, which represents the Company’s common stock reserved for issuance under the 2016 Plan that remained available for grant under the 2016 Plan as of March 11, 2020 and (y) the number of shares of the Company’s common stock subject to outstanding awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right.

The number of shares reserved shall be annually increased on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2021 and continuing until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 4% of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (ii) an amount determined by the Company’s board of directors.

1 unchanged sentence

The shares of common stock underlying any awards that expire, terminate, or are otherwise surrendered, cancelled, forfeited or repurchased by the Company under the 2016 Plan or the 2020 Plan will be added back to the shares of common stock available for issuance under the 2020 Plan

As of March 31, 2020, there were 1,192,153 shares available for future issuance under the 2020 Plan.

As of June 30, 2020, there were 1,321,261 shares available for future issuance under the 2020 Plan.

For financial reporting purposes, the Company performed common stock valuations with the assistance of a third-party specialist through October 23, 2019 to determine stock-based compensation expense for stock options.

Upon completion of the IPO, the fair value of the common stock on the grant date was based on the closing price of the stock on the date of grant.

Upon completion of the IPO, the fair value of the common stock on the grant date was based on the closing price of the stock on the Nasdaq Global Select Market on the date of grant.

The following table summarizes the Company’s stock option activity:

3 unchanged sentences

Outstanding as of December 31, 2019

Outstanding as of March 31, 2020

Options vested and exercisable as of March 31, 2020

Outstanding as of June 30, 2020

Options vested and exercisable as of June 30, 2020

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the period.

The weighted-average grant date fair value of the Company’s stock options granted during the three months ended March 31, 2020 was $10.11.

The Company did not grant stock options during the three months ended March 31, 2019.

The assumptions that the Company used to determine the grant date fair value of stock options granted to employees, non-employees and members of the Board during the th ree months ended March 31, 2020 were as follows, presented on a weighted-average basis Stock-based compensation expense was allocated as follows (in thousands) :

March 31, 2020

The weighted-average grant date fair value of the Company’s stock options granted during the three and six months ended June 30, 2020 was $10.36 and $10.16, respectively.

The weighted-average grant date fair value of the Company’s stock options granted during each of the three and six months ended June 30, 2019 was $3.42.

The assumptions that the Company used to determine the grant date fair value of stock options granted to employees, non-employees and members of the Board during the three and six months ended June 30 , 2020 and 2019 were as follows, presented on a weighted -average basis Stock-based compensation expense was allocated as follows (in thousands) :

Three Months Ended June 30,

Six Months Ended June 30,

Expected term (in years)

5 unchanged sentences

Vesting of these options was contingent on the closing of the second tranche of Series B Preferred Stock financing.

Stock-based compensation expense associated with these performance-based stock options is recognized if the performance conditions are considered probable of being achieved, using management’s best estimates.

Stock-based compensation expense associated with performance-based stock options is recognized if the performance conditions are considered probable of being achieved, using management’s best estimates.

As a result of the performance condition being met on February 25, 2020, these options will vest as to 25% of the shares underlying each option on February 25, 2021 and as to the remainder of the shares in equal quarterly installments for three years thereafter.

The Company recognized stock-based compensation expense of less than $0.1 million for these options during the three months ended March 31, 2020.

The Company recognized stock-based compensation expense of less than $0.1 million for these options during the three and six months ended June 30, 2020, respectively.

Stock-Based Compensation

Stock-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

Three Months Ended March 31,

Stock-based compensation expense included in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

1 unchanged sentence

Total stock-based compensation expense

As of March 31, 2020 and December 31, 2019, total unrecognized compensation cost related to the unvested stock-based awards was $6.3 million and $3.3 million, respectively, which is expected to be recognized over a weighted-average period of 3.23 and 3.17 years, respectively.

As of June 30, 2020 and December 31, 2019, total unrecognized compensation cost related to the unvested stock-based awards was $5.6 million and $3.3 million, respectively, which is expected to be recognized over a weighted-average period of 3.03 and 3.17 years, respectively.

2020 Employee Stock Purchase Plan

On October 1, 2019, the Company’s board of directors adopted, and on February 26, 2020, the Company’s stockholders approved a 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective on March 11, 2020.

On October 1, 2019, the Company’s board of directors adopted, and on February 26, 2020, the Company’s stockholders approved the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective on March 11, 2020.

The 2020 ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 193,216 shares of the Company’s common stock.

4 unchanged sentences

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act also established a Paycheck Protection Program whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs .

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Basic and diluted net loss per share is determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period.

In 2020 the net loss applicable to common stockholders did not equal net loss due to the accretion of the beneficial conversion feature of Series B Preferred Stock in the amount of $7.9 million.

Net loss applicable to common stockholders for the six months ended June 30, 2020 did not equal net loss due to the accretion of the beneficial conversion feature of Series B Preferred Stock in the amount of $7.9 million.

The beneficial conversion feature was initially recorded as a discount on the Series B Preferred Stock with a corresponding amount recorded to Additional Paid-in Capital.

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Three Months Ended

Six Months Ended

Series Seed Preferred Stock

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Lundbeckfond Invest A/S also purchased 187,500 shares of common stock in the IPO.

This reflects a 7.5% and a 9.3% ownership interest on a fully diluted basis as of March 31, 2020 and December 31, 2019, respectively.

This reflects a 6.9% and a 9.3% ownership interest on a fully diluted basis as of June 30, 2020 and December 31, 2019, respectively.

Mette Kirstine Agger, a member of our board of directors, is a Managing Partner at Lundbeckfonden Ventures, which is an affiliate of Lundbeckfond Invest A/S.

2 unchanged sentences

All shares of preferred stock converted into shares of common stock upon closing of the IPO.

This reflects a 2.6% and a 4.2% ownership interest on a fully diluted basis as of March 31, 2020, and December 31, 2019, respectively.

This reflects a 2.5% and a 4.2% ownership interest on a fully diluted basis as of June 30, 2020 and December 31, 2019, respectively.

Lundbeck did not participate in the Series B Preferred Stock financing.

To date, pursuant to the license agreement, the Company has made cash payments to Lundbeck of $1.8 million consisting of an upfront payment and ongoing milestone payments which are recorded as research and development expense.

To date, pursuant to the Lundbeck Agreement, the Company has made cash payments to Lundbeck of $1.8 million consisting of an upfront payment and ongoing milestone payments which are recorded as research and development expense.

Cydan Development, Inc.

Cydan Development was the Company’s principal stockholder upon formation in January 2016.

As of December 31, 2019, Cydan no longer held any of the Company’s equity, however given the Company and Cydan have common board members, Cydan is considered a related party.

Cydan continued to provide office space, personnel assistance, and other business services as needed to the Company pursuant to the Business Service Agreement through August 17, 2019.

The Company paid Cydan less than $0.1 million during the three months ended March 31, 2019 related to these services, all of which was recorded as research and development expense.

In January 2016, the Company entered into a Business Services Agreement with Cydan Development, Inc., or Cydan, pursuant to which Cydan provided office space, personnel assistance, and other business services to the Company on an as-needed basis.

At the time the agreement was signed, Cydan was considered a related party because Cydan was a holder of more than 5% of the Company’s capital stock and Dr.

James McArthur was the Company’s founder, President and Chief Executive Officer, a member of the Company’s board of directors and a holder of more than 5% of the Company’s capital stock and the Chief Scientific Officer of Cydan.

As of June 30, 2020, Cydan is no longer considered a related party.

The Company paid Cydan less than $0.1 million during the three and six months ended June 30, 2019 related to the Business Services Agreement, all of which was recorded as research and development expense.

The Company agreed with Cydan to terminate the Business Services Agreement and all related services rendered by Cydan to the Company effective as of August 17, 2019.

Accordingly, there were no amounts due to Cydan as of March 31, 2020 and December 31, 2019.

Accordingly, there were no amounts due to Cydan as of June 30, 2020 and December 31, 2019.

Benefit Plans

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The Company has made no contributions to the plan to date.

Subsequent Events

On April 13, 2020, the underwriters of the IPO exercised their option in full to purchase 705,000 additional shares of common stock for aggregate gross proceeds of $11.3 million.

The Company received approximately $10.3 million in net proceeds after deducting $1.0 million of underwriting discounts and commissions and estimated offering expenses.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements